The looming failure of postmerger integration kristin moyer. Failed office depot and staples merger a sign of the times. The revelation was startling and coca cola decided that it was time to change their formula to make it sweeter like pepsi. In other words, for every way to do a merger right, there are probably 10 ways to do it wrong. Our experience with product innovation and new product launches, coupled with the. Yet in 1985 the cocacola company decided to terminate its most popular soft drink and replace it with a formula it would market as new coke. Longtime coke drinker fidel castro called new coke a sign of american capitalist decadence. Coke when they realized market share was falling and christened it classic coke. Would a merger between coca cola and pepsi violate anti. One of the most wellknown marketing flops happened in 1985 with new coke, a soft drink designed to replace the original cocacola flavor. If this was the case, how come when cocacola launched the product, new coke failed so miserably. It is worth noting that some of the problems cocacola has faced and. Aug, 2009 in all these blind unbranded taste tests the new coke outperformed both pepsi and existing coke. Indeed, with nearly 1 billion cocaola drinks sold every single day, it is the worlds most recognized brand.
Now, in numerous blind taste tests among consumers, new coke successfully beat out pepsi time after time. The efforts to launch a new product began as a tactic to combat pepsis taste test marketing campaign, in which consumers where shown preferring the taste of pepsi over the original coke product. Nine steps to prevent merge strategies for managing change. To understand why this potentially disastrous decision was made, it is necessary to appreciate what was happening in the soft drinks marketplace. Pepsis market share was gradually increasing, and if it continued it would overtake coke by 1990. No one could fault cocacola for not doing their research. This was perceived to be caused by two main factors. In 1992, it was renamed coke ii by 1985, cocacola had been losing market share to diet soft drinks and noncola beverages for many years.
Team members varun aggarwal shashank rana preeti kumari rahul yadav sapna rana nitin kumar jyoti chauhan vijay kundra 2. The new coke case study akshay kale 17pgp062 arnab ghosh 17pgp243 kunal rawat 17pgp071 rishabh sharma 17pgp249 how it began invented by john styth pemberton in 1885 in atlanta, usa, it started of by the name french wine coca as a nerve tonic containing wine and coca leaves an year later, the wine got replaced by caffeine and kola nut and got a new name. Pepsi currently owns about 30% of that same market. Anyone who has researched merger success rates knows that roughly 70 percent of mergers fail. The company told the media it was adjusting its formula for modern tastebuds. Coca cola brand failure new coke brand failure of new coke. In particular, in the failure case, i will show how the different strategies, the lack of organizational fit and political battles between the norwegian and swedish national authorities contributed to make the merger a failure. Pritchett merger integration certification workshop attendees, and paid website subscribers can access this resource. The banking industry has undergone massive restructuring as a result of the financial crisis. Pdf on feb 1, 2019, naama al tunaiji and others published coca cola. Now the hard work of postmerger integration begins.
Businesses large or small, desirous of potential benefits from merger and acquisition deals, cannot get a 100% guarantee on the deals success. Most mergers fail at the execution stage and execution can be fixed. Based on the average closing price of cocacola common shares during the 15 days preceding the agreement. Since 1985 i have held that the socalled new coke fiasco was actually planned by coke and in this presentation i lay out the details. By the early 1980s, coke had lost its grip on the soda market and only controlled 24 percent of the market share. New coke beat pepsi in a battery of taste tests, executives insisted. The consolidation of aol time warner is perhaps the most prominent merger failure ever. So the stakes are high when it comes to business mergers.
Potential acquisition targets were either not available or did not meet our. Cocacola spent over four million dollars developing, testing, and marketing new coke. Whilst pepsi had existed for practically the entirety of cokes history they were never a large threat to the dominance of coke after wwii. They tested the new coke formula on 200,000 subjects and came up with a drink that beat pepsi and old coke time and time again. Over 400,000 angry calls and letters received by the company. The cocacola company, american corporation founded in 1892 and. Cocacola says european bottling merger will dent quarter. Coke now expects the net impact of acquisitions, divestitures and. In the fierce cola wars of the 80s, new coke was no shot across the bow. What coca cola enterprises merger means for investors the.
The inability of a product to realize the required market share to sustain its presence in the market. Based on the average closing price of cocacola common shares. Cocacola merger creates africas biggest beverages firm according to the watchdog, this is necessary since the entities are involved in freight forwarding and logistics services of perishable and nonperishable goods and the transaction is likely to lead to redundancies. This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre and postmerger processes. The move to acquire columbia pictures began last jan. Select multiple pdf files and merge them in seconds. Why your merger failed the majority of mergers are like marriagesthey dont work. Shortly, saying you liked new coke simply wasnt cool. Minute maid was coca cola companys first acquisition outside of the. The withdrawal of the product from the market for any reason. Here are my top 10 most common, preventable merger failure modes. Apr 23, 2015 cocacola was number one at the time, but pepsi was gaining ground and cutting into coke s precious market share. Pdf indias more than one billion people, growing middle class and low per.
Mar 27, 2006 3272006 there are nine deadly sins that can mess up any merger, according to harvard business school and mit graduates now working for booz allen hamilton. Corporate culture is the only truly sustainable competitive advantage and the root cause of any mergers failure or success. A psychiatrist hired to analyze phone calls to the company hotline reported that some people sounded like they were discussing the death of a family member. The failure of the introduction of new coke raises the question of who was responsible for this notorious flop. Inaccurate estimation of the related risk can result in failure of the merger. Nicholas andreadis, extended university programs dr. Would a merger between coca cola and pepsi violate antitrust. Coca cola is responsible for one of the biggest blunders in marketing new coke. Blind taste tests indicated that consumers seemed to prefer the sweeter taste of rival pepsicola, and so the cocacola recipe was. A mckinsey perspective on value creation and synergies almost 50 percent of the time, due diligence conducted before a merger fails to provide an adequate roadmap to capturing synergies and creating value. New coke case study great ideas for teaching marketing. There have been many that resulted in complete disaster. Product failure a product is a failure when its presence in the market leads to.
I put this together for a critical thinking course. In 1984, coke introduced new coke, a drink with a slightly different recipe more intended to taste like pepsi. However this changed in the mid 70s with pepsi running two. The boards of directors of cocacola enterprises, cocacola iberian partners and the cocacola company have approved the transaction. One needs to ask the question, why would a company totally get rid of a product that has had years of success and has been the backbone of the company for.
Kearney in 2004 to identify the most critical phase to merger success or merger failures, revealed that 30% of survey respondents emphasised the importance of the pre merger phase. Dec 26, 2017 new coke was a coca cola brand failure story. Inadequate due diligence due diligence is a crucial component of the merger and acquisition process as it helps in detecting financial and business risks that the acquirer inherits from the target company. Mar 08, 2020 businesses large or small, desirous of potential benefits from merger and acquisition deals, cannot get a 100% guarantee on the deals success. Jun 25, 2019 the consolidation of aol time warner is perhaps the most prominent merger failure ever.
Apr 18, 2006 in 1984, coke introduced new coke, a drink with a slightly different recipe more intended to taste like pepsi. The criteria can be found in the carbon accounting manual. And after that the product had no hope, no matter how tasty it might have been. Indeed, with nearly 1 billion cocacola drinks sold every single day, it is the worlds most recognized brand. Jun 23, 1982 the move to acquire columbia pictures began last jan. We argue that failure may stem from informational asymmetries. Three cocacola bottlers confirm merger marketwatch. Along with bank failures and government nationalization, mergers and acquisitions have dramatically transformed the banking landscape as we know it. In 1985 the cocacola company decided to terminate and replace its soft drink with a new formula.
The merger of the three companies into cocacola european partners is expected to close by the end of june, with the new shares trading on both the new york stock. Coca cola currently owns about 40% of the soft drink market. The company was sure they had a winner on their hands. A merger is a combination of two companies, in which one corporation absorbs another corporation or a joint company is formed. Cocacola was number one at the time, but pepsi was gaining ground and cutting into cokes precious market share. Merger failures and cultural conflicts how to avoid them. Jan 23, 2009 the banking industry has undergone massive restructuring as a result of the financial crisis. Cocacola swallows subsidiary in merger business today kenya. Jun 29, 2015 corporate culture is the only truly sustainable competitive advantage and the root cause of any mergers failure or success. As someone who lived through the new coke episode i was 19, it seems to me that what happened was that the meme that new coke was bad caught on somehow.
The merger is expected to close in the second quarter of 2016. Staples and office depot became the latest companies to abandon plans for a merger after facing scrutiny on antitrust grounds. Potential acquisition targets were either not available or. Logic would dictate that corporations would select companies that complement their existing brands or take the business into new markets but always with the belief that the lesser companys products and services are.
Cococola trade name of a sweetened, carbonated drink, originally made with coca leaves and flavoured with cola nuts, and. Finally, put the right incentives in place to make the merger appealing to employees on both sides. In the early 1980s, pepsi and cocacola were the two biggest soft drink companies in the world. New coke marketing case study the new coke story in a nutshell. New coke was the unofficial name for the reformulation of cocacola introduced in april 1985. Make clear choices about the new, combined entitys behaviors. Kelley, current president and general manager of still beverages and supply chain for cocacola north america, to oversee its merger with cocacola enterprises cce north american operations. Major causes of merger failure are all people related. This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre and post merger processes. For instance, these incentives might be built around achieving certain growth or client satisfaction objectives. There are many reasons for the failure of cocacola company getting rid of their original formula and introducing a new product called new coke. New coke was the unofficial name for the reformulation of cocacola introduced in april 1985 by the cocacola company. In the 1970s pepsi had introduced the pepsi challenge a blind taste test which showed most americans preferred pepsi to coke by continue reading new coke market research. The inability of a product to achieve the anticipated life cycle as defined by the organization due to any reason.
In chapter 2 the literature on mergers and acquisitions will. May 11, 2016 staples and office depot became the latest companies to abandon plans for a merger after facing scrutiny on antitrust grounds. However this changed in the mid 70s with pepsi running two well known ad campaigns. While there are many important postmerger activities, the. Jun 18, 2014 why your merger failed the majority of mergers are like marriagesthey dont work. This product is often referred to as new coke, but the intention of the packaging was to indicate that coke was new. The reason why coke changed it is a simple one, pepsi happened. Journal of financial economics university of california.
Think of a brand success story, and you may well think of cocacola. Cocacola hbc acquisitions visit cocacola hbc and view our financial results for the full year of 2016. Nine steps to prevent merger failure 3272006 there are nine deadly sins that can mess up any merger, according to harvard business school and mit graduates now working for booz allen hamilton. In 1985, cocacola completely withdrew their flagship product from the market and replaced it with a new coke in the us and some international markets. What coca cola enterprises merger means for investors. The root cause of every mergers success or failure. Nine steps to prevent merger failure hbs working knowledge.